Unbanked

Written By
Paul Tracy
Updated August 5, 2020

What is Unbanked?

A person is unbanked when he or she does not participate in the banking system and relies on the use of cash rather than checks or credit cards.

How Does Unbanked Work?

Let's assume John Doe is poor and does not trust banks. He cannot afford the monthly fees of a checking account, so he uses cash and cashiers' checks from a convenience store to pay his bills. John Doe could operate more efficiently with a checking account, a savings account, and maybe a debit or credit card, but he chooses not to have those things. He is unbanked.

Why Does Unbanked Matter?

The Federal Depository Insurance Corporation (FDIC) surveys the nation's underbanked and unbanked frequently. Approximately 20% of all households are either unbanked (they do not use banks at all) or underbanked (they use banks only on a limited basis).